Commercial backlog is not automatically the paragraph 120 amount
Ind AS 115 paragraph 120 requires the aggregate transaction price allocated to performance obligations unsatisfied or partially unsatisfied at period end, with an explanation of when revenue is expected. Start from the accounting contracts, allocation and satisfaction working, rather than copying the sales team’s order book. Different populations and measurement bases can make the two figures differ legitimately.
Read the applicable text: ICAI Ind AS 115: paragraphs 120–122 and B16 ICAI 2025–26 compendium, Volume I.
Separate recognised performance from the remainder
For partially satisfied obligations, identify the amount still allocated to future performance on the supported accounting basis. Do not include already recognised revenue again. Reconcile modifications, cancellations, allocation changes and constraints before assigning timing. This disclosure is not a replacement for the revenue recognition analysis.
Apply the original-duration expedient correctly
Paragraph 121(a) permits omission of paragraph 120 information for an obligation that is part of a contract with an original expected duration of one year or less. The original expected duration matters. A multi-year contract with less than a year left does not qualify merely because its remaining term is short. Preserve the inception duration evidence and the entity’s actual application of the expedient.
Check B16 independently
Paragraph 121(b) provides a separate practical expedient where revenue is recognised in accordance with B16. B16 concerns a right to consideration corresponding directly with the value to the customer of performance completed to date. Do not classify every time-based bill or monthly invoice as qualifying without the actual recognition analysis. Paragraph 122 requires qualitative explanation of the use of the expedients.
Explain consideration outside the transaction price
Paragraph 122 also requires qualitative explanation where consideration is not included in the transaction price and therefore not included in paragraph 120 information, such as constrained variable consideration. A commercial estimate of potential bonus revenue is not necessarily an allocated transaction-price amount. Do not label every order-book difference constrained consideration without analysing its cause.
Reconcile amount and timing together
Paragraph 120 permits appropriate quantitative time bands or qualitative timing information. Choose a presentation that reflects the remaining obligations’ duration and tie it back to the aggregate. The examples assume validated contract, allocation and recognition conclusions; they illustrate the disclosure reconciliation rather than prescribing revenue timing or assuming that all order values are enforceable contracts.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Partially satisfied obligation
A contract’s supported allocated transaction price is ₹100 lakh and ₹65 lakh has been recognised for satisfied performance. Assume no other allocation movements: ₹35 lakh remains for the paragraph 120 working before any applicable expedient. The recognised ₹65 lakh must not be counted again as future revenue.
Illustrative example 2: Remove a commercial bonus estimate
The sales backlog is ₹80 lakh, including a ₹12 lakh potential bonus assumed wholly constrained and excluded from transaction price. On those facts the transaction-price-based starting amount is ₹68 lakh. Explain the excluded consideration under paragraph 122; the ₹12 lakh is not automatically added simply because it appears in a sales forecast.
Illustrative example 3: Original duration controls
An originally 24-month contract has eight months left and ₹16 lakh remaining allocated price. It does not qualify for paragraph 121(a) merely because eight is less than twelve. The original term exceeds the one-year condition by twelve months; evaluate any separate B16 qualification independently.
Illustrative example 4: Document an elected short-contract expedient
A fictional population contains ₹45 lakh remaining allocated price on original nine-month contracts and ₹70 lakh on original 30-month contracts. Assume the entity applies paragraph 121(a) to the first population and no other expedient applies. The paragraph 120 disclosed amount is ₹70 lakh, with ₹45 lakh tracked separately and the expedient explained; the combined pre-expedient working is ₹115 lakh.
Illustrative example 5: Time bands must add up
A supported disclosed remainder of ₹90 lakh is expected to become revenue as ₹36 lakh in the first time band, ₹42 lakh in the second and ₹12 lakh later. The bands total ₹90 lakh. A draft showing ₹15 lakh in the final band would total ₹93 lakh and require a ₹3 lakh reconciliation.
Illustrative example 6: Separate the B16 population
A supported pre-expedient remainder is ₹150 lakh. Obligations totalling ₹55 lakh qualify for an elected B16-related expedient, while ₹95 lakh do not and have no other exclusion. The paragraph 120 amount is ₹95 lakh. Document the ₹55 lakh recognition basis and qualitative explanation rather than claiming that monthly invoicing alone establishes eligibility.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify accounting contracts | Enforceable contract population and period. |
| 2 | Map remaining obligations | Unsatisfied and partially satisfied performance. |
| 3 | Verify allocated transaction price | Supported measurement and allocation. |
| 4 | Remove recognised performance | Revenue-to-remainder bridge. |
| 5 | Reconcile commercial backlog | Scope and measurement differences. |
| 6 | Check original-duration eligibility | Inception term, not merely remaining term. |
| 7 | Check B16 eligibility separately | Direct-value-to-customer recognition analysis. |
| 8 | Document expedients applied | Paragraphs 121–122 conclusion and disclosure. |
| 9 | Explain excluded consideration | Constraints and other transaction-price exclusions. |
| 10 | Tie amounts and timing | Paragraph 120 aggregate, bands or qualitative timing. |
Sixteen practitioner FAQs
1. Is order-book value necessarily the disclosed amount?
No. Reconcile the accounting population, transaction price and remaining performance.
2. Which paragraph requires the aggregate?
Paragraph 120 of Ind AS 115.
3. Are partially satisfied obligations included?
Include the supported remaining allocated amount.
4. Should revenue already recognised remain in the future amount?
No. Avoid counting satisfied performance twice.
5. Does a short remaining term establish the one-year expedient?
No. Paragraph 121(a) refers to original expected contract duration.
6. Can an original nine-month contract qualify?
Subject to the facts, it meets the stated duration condition.
7. Is the duration test the only expedient?
No. Paragraph 121(b) separately addresses B16 recognition.
8. Does monthly invoicing automatically prove B16 eligibility?
No. Analyse whether the right corresponds directly to value of completed performance to the customer.
9. Must applying an expedient be explained?
Paragraph 122 requires the qualitative explanation.
10. Is every sales forecast an accounting transaction-price input?
No. Establish the relevant recognition and measurement basis.
11. Can constrained variable consideration explain a difference?
Yes, where supported, and paragraph 122 calls for qualitative explanation.
12. Should all unexplained differences be called constrained?
No. Identify the actual scope or measurement cause.
13. Are time bands mandatory in every presentation?
Paragraph 120 also permits qualitative timing information.
14. Must quantitative bands reconcile to the aggregate?
Yes. Preserve a complete amount-to-timing bridge.
15. Does the disclosure decide when revenue is recognised?
No. Recognition requires its own applicable analysis.
16. What closes the note working?
A supported population, exclusions, aggregate and timing explanation tied to final disclosures.
Official sources
ICAI Ind AS 115: paragraphs 120–122 and B16 ICAI 2025–26 compendium, Volume I